Hit Entertainment strikes a deal with lenders

Hit Entertainment, the owner of Thomas the Tank Engine and Bob the Builder, has struck a deal with lenders to secure the future of the business after being forced to make a $500m (£326m) writedown in the value of its assets.

Hit Entertainment has reached a deal with its lenders to amend and extend its credit facilities. The company had broken its lending rules last month. It emerged over the weekend that the company had been forced into a $500m non-cash writedown, leading Hit to record a pre-tax loss of $569m for the year to the end of July 2009. The writedown means that the value of a £489m investment by its private equity owners, Apax Partners, has dropped to zero.

Hit, which is chaired by the former BBC director general Greg Dyke, has said that despite its banking covenant issues the business is fundamentally sound and highly cash-generative.

"We are delighted to conclude these negotiations with our lending group and are grateful for their support," said Jeffrey Dunn, president and chief executive of Hit. "This allows us to focus on what we do best, making great entertainment for kids."

The British-American company, which reported a revenue increase from $238.4m to $249.2m in the 12 months to the end of July 2009, said that the new creditor arrangements would "pave the way for continued expansion at the company".

In its results Hit warned that revenue from sales of DVDs were under threat from the growing number of illegal internet downloads.

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